In this article, we'll look at starting a consulting business withyour best foot forward, essentially your right foot-in-the-door, so youdon't inadvertently sabotage yourself with your foot-in-your-mouth.

Now pricing is a very individualized decision.  Some sales experts say youshould scout around to find out what the competition is charging andthen set your price somewhere in the middle.  But the most importantthing to remember is that you have to think about pricing verycarefully before setting your final rates.  Changing your prices isgoing to be very difficult later on, so you have to make sure you setthem right in the beginning.

And it certainly is worth pointingout... When you're starting a consulting business, it's common to thinkthat prospects make their decisions largely based on price.  Thereality however is quite different.  The best qualified prospects areoften a lot more tuned into being value-conscious, rather thanprice-driven, and often pursue a vendor who has the lowest perceivedrisk, because of their underlying fear of failure.

So considerthese following 5 factors that should go into your pricing strategiesas you are starting a consulting business, regardless of how and whatyou decide to charge for your solutions.

1. Geography. Generally, consultants within large cities can command higher billing rates than those in the suburbs.  Many of these geographic issues can be traced to monthly overhead or a more general cost of doing business.
2. Scarcity of Skills. You might have a specialty … or be a generalist.  You need to think about how in-demand you are to your potential clients as you are starting a consulting business and setting rates.  In much the same way that a cardio-thoracic surgeon can charge more for an office visit than a general practice physician, a consulting firm specializing in firewalls, Virtual Private Networking (VPN) and penetration testing will be able to command higher billing rates than a firm that just installs PCs and LANs.
3. Local Demand. How booked up are your competitors?  Just like the hotel industry, when consultants start approaching 80% - 85% utilization rates (about 32-34 billable hours per week), prices will get firm.  As you are starting a consulting business, make sure you know how busy those in your industry and specialty tend to be.  When consultants are sitting at their desks on a Monday morning twiddling their thumbs and hoping their phones will ring, they really need to think about being more aggressive about marketing and awareness-building, or tweaking their specialty to make them more marketable.
4. Overhead. You need to consider how much it costs for you to get trained each year, the cost of lab/test equipment, how much time and money you need to invest in marketing to keep your calendar relatively full, insurance, taxes, professional services (accountants, attorneys, etc.), cell phones, electricity, and everything else as you are starting a consulting business.  All of these overhead items can factor into the prices you will charge your clients, so you can’t ignore them.
5. Client Size. A home-based micro small business will generally have a much smaller IT budget than a 10-person downtown law office.  And the 10-person downtown law office will have nowhere near the IT budget as the 100-employee (50 PC) manufacturer.  Think about the size of the clients you will be serving and what they can reasonably afford to pay you for your services before setting your prices.  And if the size of business you are targeting can’t afford to pay you sustainable rates, it’s probably time to seek out a new target for your services.

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